Question

Describe the specific risks, benefits, and internal controls associated with IT functions.

Answer 1

Fraud is generally defined in the law as an intentional misrepresentation of material existing fact made by one person to another with knowledge of its falsity and for inducing the other person to act, and upon which the other person relies with resulting injury or damage

1.Types of Fraud:
There may be many types which includes
On-line Fraud - the fraudsters rely on internet    to commit frauds.
Individual Fraud-It is targeting a person directly
Corporate Fraud -Its fraud committed against business.

2.Fraud Triangle:

The three conditions of fraud are referred to as the “fraud triangle” .
a. Incentives/Pressures - The Company is under pressure to meet debt covenants or obtain additional financing.
b. Opportunities – Ineffective oversight of financial reporting by the board of directors allows management to exercise discretion over reporting.
c. Attitudes/Rationalization – Management is overly aggressive. For example, the company may issue aggressive earnings forecasts, or make extensive acquisitions using company stock.

3.Auditor's responsibility to identify and assess fraud.

1. When the auditor suspects that fraud may be present, then team has to verify if the Fraud occurred ad get additional information.
2. auditor's responsibility to consider the implications for other aspects of the audit. When the auditor determines that fraud may be present, then auditor has to discuss the matter and audit approach for further investigation with an appropriate level of management /superior to his level.

• Information technology (IT) will most likely affect all or many aspects of local
  government financial operations and should not be considered a separate and distinct
  area of internal control.
  Internal control is a process—effected by an entity’s board of directors, management, and other personnel—designed to provide reasonable assurance regarding the achievement of objectives in the following categories: (a) reliability of financial reporting, (b) effectiveness and efficiency of operations, and (c) compliance with applicable laws and regulations.
  IT internal controls permeate many aspects of financial operations and should be reviewed in conjunction with each department or functional
  area of responsibility

Risks:
1.management of some local governments committed occupational fraud by stealing assets from the organization.
2. Weaknesses in the information technology system were used by employees to make changes to the computer system

Benefits:
1. consistently apply predefined business rules and perform complex calculations in processing large volumes of transactions or data.
2, Enhance the timeliness, availability, and accuracy of information.
3.Enhance the ability to monitor the performance of the entity’s activities and its policies and procedures.
4.Reduce the risk that controls will be circumvented.